Independence of irrelevant alternatives (IIA) is a term for an axiom of decision theory and various social sciences. Although exact formulations of IIA differ, intentions of the usages are similar in attempting to provide a rational account of individual behavior or aggregation of individual preferences.

IIA is also known as "Chernoff's condition" or Sen's property α (alpha)

Under one common formulation, the axiom states that:

If A is preferred to B out of the choice set {A,B}, then introducing a third alternative X, thus expanding the choice set to {A,B,X}, must not make B preferred to A.

In other words, whether A or B is better should not be changed by the availability of X, which is irrelevant to the choice between A and B. This formulation appears in bargaining theory, theories of individual choice, and voting theory. It is controversial for two reasons: first, some theorists find it too strict an axiom; second, experiments by Amos Tversky, Daniel Kahneman, and others have shown that human behaviour rarely adheres to this axiom.

If A is selected over B out of the choice set {A,B} by a voting rule for given voter preferences of A, B, and an unavailable third alternative X, then B must not be selected over A by the voting rule if only preferences for X change.

In other words, whether A or B is selected should not be affected by a change in the vote for an unavailable X, which is thus irrelevant to the choice between A and B. Kenneth Arrow (1951) shows the impossibility of aggregating individual preferences ("votes") satisfying IIA and certain other apparently reasonable conditions.

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A related criterion proposed by H. P. Young and A. Levenglick is called local independence of irrelevant alternatives. It says that if one candidate (X) wins an election, and a new alternative (Y) is added, X will still win the election if Y is not in the Smith set. In other words, the outcome of the election is independent of alternatives which are not in the Smith set. Note that this neither implies nor is implied by the independence of irrelevant alternatives criterion; in fact, the two are mutually exclusive.

Many voting theorists believe that IIA is too strong a condition. The majority criterion is incompatible with IIA. Consider

7 votes for A > B > C

6 votes for B > C > A

5 votes for C > A > B

Without loss of generality, suppose a voting system satisfying the majority criterion chooses A. If B drops out of the race, the remaining votes will be:

7 votes for A > C

11 votes for C > A

and C will win under the majority criterion, even though the change (B dropping out) concerned an "irrelevant" alternative candidate who did not win in the original circumstance. This is an example of the spoiler effect.

From Kenneth Arrow (1951, pp. 15, 23, 27), each "voter" i in the society has an ordering Ri that ranks the (conceivable) objects of social choice—X, Y, and Z in simplest case -- from lowest on up (say candidates for public office or social states from different economic policies). The voting rule in turn maps the set of voter orderings (R1, ...,Rn) onto a social orderingR that determines the social ranking of X, Y, and Z. Among the objects of choice, Arrow distinguishes those that by hypothesis are specified as feasible and infeasible. Consider two possible sets of voter orderings (, ...,) and (, ...,) such that the ranking of X and Y for each voter i is the same for and . The voting rule generates corresponding social orderings R and R'. Now suppose that X and Y are feasible but Z is infeasible (say, the candidate is not on the ballot or the social state is outside the production possibility curve). Arrow's IIA requires of the voting rule that R and R' select the same (top-ranked) social choice from the feasible set (X, Y). This requirement holds no matter what the ranking is of infeasible Z relative to X and Y in the two sets of orderings. Paramesh Ray (1973) showed that Arrow's IIA does not imply an IIA similar to that at the top of this article nor conversely.

The independence of irrelevant alternatives (IIA) in econometrics is a property of the multinomial logit and conditional logit models in econometrics; outcomes that could theoretically violate this IIA (such as the outcome of multicandidate elections or any choice made by humans) may make multinomial logit and conditional logit invalid estimators.

IIA implies that adding another alternative or changing the characteristics of a third alternative does not affect the relative odds between the two alternatives considered. This implication is not realistic for applications with similar alternatives. Many examples have been constructed to illustrate this problem, including Beethoven/Debussy (Debreu, 1960; Tversky, 1972), Bicycle/Pony (Luce and Suppes, 1965), and Red Bus/Blue Bus (McFadden, 1974).

Consider the Red Bus/Blue Bus example. Commuters initially face a decision between two modes of transportation: car and red bus. Suppose that a consumer chooses between these two options with equal probability, 0.5, so that the odds equal 1. Now suppose a third mode, blue bus, is added. Assuming bus commuters do not care about the color of the bus, consumers are expected to choose between bus and car still with equal probability. But IIA implies that this is not the case: the probability of commuters that take each of the three modes equals one third. (Based on Wooldridge 2002, pp. 501-2.)

Many modeling advances have been motivated by a desire to alleviate the concerns raised by IIA. Generalized extreme value (McFadden, 1978), Conditional probit (also called multinomial probit) and mixed logit are alternative models for nominal outcomes that do not violate IIA, but often have assumptions of their own that may be difficult to meet or are computationally infeasible. The conditional probit model has as a disadvantage that it makes calculation of maximum likelihood infeasible for more than five alternatives as it involves multiple integrals. IIA can also be relaxed by specifying a hierarchical model, ranking the choice alternatives. The most popular of these is called the nested logit model (McFadden 1984).

Now, the voter who ranks [C>D>E>B>A] instead ranks [C>B>E>D>A]; and the voter who ranks [E>C>D>B>A] instead ranks [E>C>B>D>A]. Note that they change their preferences only over the pairs [B, D] and [B, E].

The new Borda count: B=14, C=13, A=12, E=6, D=5. B wins.

Note that the social choice has changed the ranking of [B, A], [B, C] and [D, E]. The changes in the social choice ranking are dependent on irrelevant changes in the preference profile. In particular, B now wins instead of C, even though no voter changed their preference over [B, C].

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